Basic Report

This study tries to make the evaluation model for Fiscal Soundness of local governments. Korean government has various evaluation tools for fiscal status of local governments; Local Fiscal Analysis, Local Fiscal Diagnoses, Local Fiscal Crisis Alert System, Double entry Bookkeeping Accounting System, Integrated Liabilities Management, etc. However, they evaluate only a part of local fiscal soundness in local governments. There is no comprehensive evaluation model for fiscal soundness of local governments. There is no clear justification for local fiscal soundness, and how to evaluate it. Therefore, this study focuses on diagnosing conditions and problems in present evaluation tools for fiscal status of local governments. Based on the results, this study shows what is fiscal soundness of local governments in Korea, and how to evaluate it; measuring elements, measurement target, measurement accounting, evaluation system, etc.
   This study finds that local fiscal soundness consists of three factors; economic base, balance of payments structure, and debt management. Economic base factor could be evaluated by size of population, rate of population growth, rate of aging population, activity rate, Gross Regional Domestic Product, etc. Balance of payments structure factor would be gauged by local tax per citizen, fiscal independence rate, need of social service, need of capital facilities, consolidated local government balance, local government balance in practice, etc. Debt management factor would be evaluated by ratio of local management debt, ratio of local contingent liabilities, consolidated local liquid liabilities ratio, etc. Certain subjects are regarded as more important or less important for local fiscal soundness. Therefore, this study also conducted AHP(Analytic Hierarchy Process) technique for weight decision. Based on the results, this study suggests evaluating system for Fiscal Soundness of Local Governments in Korea.
   Lastly, this study simulated FY 2014 Fiscal Soundness of Local Governments using FY 2014 fiscal data in 16 metropolitan councils; Seoul, Busan, Daegu, Incheon, etc. to suggest policy implications for applying this evaluation model in practice. To manage local fiscal soundness, Korean central government would be better to focus on local governments 90% below average of minimums in recent 5 years(FY 2010-FY2014).